Under the EU Stability and Growth Pact, countries are limited in the amount they can borrow.

Climate Change Minister Denis Naughten. Picture: Arthur Carron

But Climate Change Minister Denis Naughten said that in France energy co-operatives were used to complete the works, using money borrowed from the European Investment Bank (EIB) and the loans were not counted as state debt.

As many as one million Irish homes could benefit from upgrades. The Government is focused on 'deep' retrofits, which include more efficient heating systems and insulation, replacing glazing and installing pumps which use heat stored in the earth to warm buildings.

"We have a bizarre situation where we need to invest significantly to drive energy efficiency and meet our 2030 (climate) targets," the minister said.

"Money has never been so cheap. We have the capacity to repay it, but the European Stability and Growth Pact is causing us problems.

Click to view full size graphic

"We are pushing the commission on this. There have been a number of schemes - particularly in France - where they have brought together energy co-operatives and they have been able to leverage money from the EIB which hasn't gone on the French balance sheet.

"They have been able to carry out the type of retrofits that are needed."

Grants

In an interview with the Irish Independent as part of the 'Climate Change and You' series, Mr Naughten also said a scheme where interest-free loans from employers could help fund energy upgrades of up to €30,000, with the cost repaid over time, was being considered.

He will also be seeking money in the Budget to fund grants and upgrades to private houses and his department is funding a €20m 'warmth and well-being' programme in Clondalkin and Tallaght, Dublin for "really intensive" retrofits in some 800 properties where tenants had chronic breathing problems.

"Not only do you reduce energy bills, they are less likely to present to the GP and A&E," said Mr Naughten (inset).

"That (retrofits) needs to be and is the focus in relation to our bid for additional funding in the Budget. There is a significant dividend return in terms of the economy and employment."

He insists, however, that the previous targets were unrealistic and that if efforts were considered "unachievable", then people wouldn't make efforts to change behaviour.

"I have a huge job of work to do to convince people that this can be good for the economy, that we can change the way we do things and that we can be at the cutting edge, rather than bringing up the rear," he said.

"There is the perception that we have got some sort of sweetheart deal; these are going to be challenging targets.

"What I'm determined to do is focus on what we can do in the short term to 2020 and set the country on a trajectory whereby we can reach our 2030 targets."

Among the priorities for tackling climate change is the introduction of an incentive to use renewable energy to produce heat. This can include solar or geothermal energy, heat pumps or biomass (energy crops).

Ireland has a target to deliver 12pc of final heat demand from renewable energy sources by 2020, but is likely to fall short. A draft incentive scheme will be completed by the end of the year and is likely to come into force in 2017 after clearing state aid rules.

The intention is to help create a biomass market to provide rural jobs and also boost farm incomes.

Mr Naughten admitted the lack of government focus in recent years meant progress had been delayed.

"It (the State) hasn't helped the situation. I'm someone who believes we need to develop our indigenous biomass sector, not just because it can create cash income for farmers but it can provide an alternative industry to those involved in peat and it means we are not importing from other parts of the world," he said.

On encouraging people to change their behaviour and move to less-polluting forms of transport, the minister said they needed to look 'differently' at the problem and to try public transport and public bike schemes.

He would like all his Government colleagues to switch to electric or hybrid cars.